We have collected Google Trends search data for Netflix Originals up to the week ended 17th February 2018 and inputted it into our updated regression model to determine the current net subscriber additions and guide towards the quarter’s expected additions. Our model suggests Netflix would have added 4.34 million subscribers in the first half of the quarter. The current track suggests it is on pace to meet and slightly beat the company’s guidance of 6.3 million subscribers for the quarter. We are estimating net subscriber additions to be 6.6 million in Q1 2018.
About our Regression Model – Our forecast model inputs the previous 5 years’ Google Trends search history of all Netflix Originals (excluding kids programming and comedy specials) relative to Netflix’s most popular show, “13 Reasons Why”. We also adjust the forecast for seasonality and internet penetration. The model has been updated for Q4 results and has an r-squared of 99.8% with 19 degrees of freedom. Over the previous two quarters, our model has been able to forecast the net subscriber additions within a 97% confidence interval.
Exhibit 1: Netflix Quarterly Net Subscriber Additions
Source: Perspectec
Stranger Things Season 2 holding strong: ‘Stranger Things 2’ continues to be the most popular show on Netflix, followed by proven successes such as Narcos, Black Mirror and House of Cards.
The New Originals slated for the first half of the quarter don’t seem to have peaked subscriber interest yet, but we expect ‘Queer Eye’ and ‘Altered Carbon’ to gain more traction over the next few weeks.
Netflix followed through on its commitment to invest more in local language content with the release of German (Babylon Berlin), Hindi ( Love per Square Foot), Georgian (The Trader) and Japanese (Fate / Apocrypha) Originals. However, none of these shows have sparked much search interest.
Quite a few Returning Originals are up ahead: The second half of the quarter will see the much-awaited Season 2 of Marvel’s ‘Jessica Jones’ and Season 3 of ‘Love’ along with the second seasons of its less successful Originals, ‘Lemony Snicket’s A Series of Unfortunate Events’ and the French Drama ‘Marseille’. We expect these shows to make up the difference between the current expected net subscriber additions of 4.3 million and guidance of 6.3 million.
Stock Price Impact – Based on the stock price behavior in 2017, a beat of more than 20% is required to result in a stock price bump. With the current expectation that Netflix will meet guidance, we do not expect a stock price impact driven by subscriber additions at this point.
Exhibit 2 – Financial Forecast
Source: Company Reports and Perspectec
Important Disclosures and Disclaimer
This publication is produced by Perspectec Inc. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure,
distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Perspectec Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, independent contractors, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof.
No publications, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments.
This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person. Please refer to Persepctec Inc.’s terms of use disclosure and privacy policy https://perspectec.com/term_of_use
|
RATING |
CURRENT RATING |
PREVIOUS RATING |
|
BUY |
||
|
HOLD/NEUTRAL |
✔ |
✔ |
|
SELL |
For the purposes of complying with NYSE, NASDAQ and all Self-Regulatory Organizations, Perspectec Inc. has assigned the following rating system BUY, HOLD/NEUTRAL, SELL for the securities which are the views expressed by an analyst, Independent contractor, and or an employee of Perspectec Inc. The information and opinions in these reports were prepared by Perspectec Inc. or an analyst, independent contractor. Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Perspectec Inc. makes no representation as to its accuracy or completeness.
